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The new law requires MBTA communities to allow multifamily zoning by-right near train stations and points where bus lines intersect. A 2021 Metropolitan Area Planning Council study estimated this would create 31,000 acres worth of development sites in 38 communities that currently have more restrictive zoning.

Preserving ‘Town Character’ Isn’t a Good Reason to Stop Development

Suburban leaders are taking aim at a centerpiece of the Baker administration’s plans to tackle the state’s housing crisis by spurring construction of hundreds of thousands of new apartments and condominiums.

The Massachusetts Municipal Asso-

ciation and the Massachusetts Municipal Lawyers Association are raising serious concerns about the MBTA Communities law and in particular how state officials hope to go about enforcing it.

The new law, which passed last year, uses the threat of the loss grant money to prod cities and towns within a certain distance of T commuter rail, bus and subway stops to open the door to hundreds and in some cases thousands of new multifamily units in various communities.

However, some communities, especially smaller ones in the outer suburbs

without sewer service or municipal water, may simply take the hit and lose state grant money rather than comply with the law, which would require towns to zone for at least 750 new multifamily units, the two groups warned.

But in their opposition, local officials are going beyond mundane complaints about the lack of infrastructure to raise concerns of a fuzzier, more metaphysical nature, namely that opening the door to large numbers of multifamily units will negatively alter the time-honored “character” of individual towns. Continued

WEEK OF MONDAY, APRIL 11, 2022 BY THE NUMBERS PAGE 6 County close-up: Bristol Spotlight: Dighton IN PERSON PAGE 8 Even before the pandemic, the “Amazon effect,” had changed consumers’ expectations about how they interact with companies. The Aite-Novarica Group’s Paul Legutko wants to help lenders meet these demands. RISING RATES Housing Pipeline Faces a Stress Test Interest Rates, Construction Costs Pressure Financing By Steve Adams | Banker & Tradesman Staff FROM THE FED Dallas Fed Researchers Warn of Housing ‘Bubble’ Home Prices Becoming ‘Unhinged from Fundamentals’ By James Sanna | Banker & Tradesman Staff Commercial Real Estate PAGE 7 HOUSING AROUND TRANSIT NODES Threatened by Local Concerns The Federal Reserve is indicating it may raise interest rates in halfpercentage-point jumps rather than the more traditional quarter-point in an effort to combat inflation. See Week on the Web on page 2. Source: Federal Reserve meeting minutes .5 percent Freddie Mac estimates the average monthly mortgage payment for new buyers is 20 percent higher than it was this time last year. See the editorial on page 4. Source: Freddie Mac 20 percent 8.3 percent The national median payment applied for by applicants jumped 8.3 percent to $1,653 in February, up from $1,526 in January. See page 9. Source: Mortgage Bankers Association Teachers Insurance Fund provided 15 percent of mortgage loans in February in Bristol County. See By the Numbers on page 6. Source: The Warren Group Seventy percent of survey respondents said they increased their customer service budget in the past year. See the In Person on page 8. Source: Aite-Novarica Group 15 percent 70 percent Cape Cod Realtors say a proposed 2 percent transfer tax may help slow sales growth on the islands. See page 5. Source: Candace deRosa and Ken Beaugrand A previous version of this statistic stated that MAR proposed the tax; in fact, MAR opposes it. We regret the error. 2 percent 4.7 percent $5,000 Last week’s mortgage rates topped 4.7 percent. See Week on the Web on page 2. Source: Freddie Mac First-time homebuyers in Somerville can receive up to $5,000 to help with closing costs on new mortgages. See Lew Sichelman’s column on page 4. Source: Down Payment Resource Unless otherwise noted, all data is sourced from The Warren Group’s Mortgage Market Share Module, Loan Originator Module, Statistics Module and/or proprietary database. For more information please visit www. Banking & Lending PAGE 9 COMMERCIAL INTERESTS ANNIVERSARY REAL EST AT E & FINANCIAL INFORM AT ION SINCE 1872 REAL ESTATE & FINANCIAL INFORMATION SINCE 1872 SPRING MARKET PREVIEW SEE PAGE 10 BANKING & LENDING BY THE NUMBERS
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The Week on the Web



• Federal Reserve officials are signaling that they will take an aggressive approach to fighting high inflation in the coming months – actions that will make borrowing sharply more expensive for consumers and businesses and heighten risks to the economy.

• In minutes from their March policy meeting released last week, Fed officials said that half-point interest rate hikes, rather than traditional quarter-point increases, “could be appropriate” multiple times this year.

• The Fed’s plans “reflect their great discomfort with the rapid pace of inflation,” said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics.

• Many economists have said they worry the Fed has waited too long to start raising rates and could be forced to respond so aggressively as to trigger a recession.


• Salem Five Bank has signed a multiyear agreement with New England Sports Network for the naming rights to NESN’s Watertown studio. It will now be called the Salem Five Studio.

• The partnership extends across the physical studio, NESN’s Red Sox and Bruins programming and NESN’s social media channels. The bank will also be incorporated into weekly in-game features on NESN’s telecast of Red Sox and Bruins games.


• Needham Bank has acquired the cannabis banking and money service businesses that Eastern Bank inherited from its November merger with Century Bank.

• The banks announced in January that they had agreed to transfer the cannabis business. As part of the transaction, Needham Bank has hired the cannabis banking team involved with the business, including executive vice president Paul Evangelista, who launched and led the cannabis banking strategy at Century Bank for the past nine years. Dallas

Fed Researchers Warn of Housing ‘Bubble’


• The developer of a mixed-use project above the Massachusetts Turnpike in Back Bay dropped plans for a hotel in favor of office-lab space and swapping out luxury condos for 125 affordable apartments.

• Peebles Corp. is the designated developer of the Massachusetts Turnpike air rights parcel 13 at Boylston Street and Massachusetts Avenue.

• New York-based Peebles previously submitted plans to the Boston Planning and Development Agency for a 432,000-square-foot hotel and luxury condominium building. The revised development eliminates the condos in favor of 125 income-restricted apartments. The hotel would be replaced with 300,000 square feet of office-lab space.

• Developers originally planned to demolish the existing two-story structure, but decided to retain the facade after consulting with Boston officials.

• The building was constructed in 1866 as stables and later was converted into a succession of restaurants during the 20th century.

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Gronkowskis Team Up with Downtown Boston Condo Developer Zoning Reforms Don’t Eliminate Local Control Co-Founder of North Andover Mortgage Business Sentenced A Statement Building in the Seaport Seeks HQ Tenants Help for Down Payments Available Ruling Clears Way for Chelsea Waterfront Development Sullivan Square Project Includes 878K SF of Offices, Labs Short-Term Rental Battle Returns to Nantucket New Round of Zoning Reforms Surfaces on Beacon Hill Timothy M. Warren Jr., CEO and Publisher David B. Lovins, President and COO BANKER & TRADESMAN ESTABLISHED 1872 Published by The Warren Group PUBLISHING Associate Publisher: Cassidy Norton Managing Editor: James Sanna Associate Editor, Commercial Real Estate: Steve Adams Associate Editor, Banking: Diane McLaughlin Contributing Writer: Scott Van Voorhis Web Editor: Yasmin Daiha Senior Customer Support Specialist: Sarah Ahlgren Advertising Account Managers: Caitlin Bobe Graphic Designer: William Samatis DATA SOLUTIONS Director of Sales & Marketing: John Bottini Communications Manager: Mike Breed Executive Data Solutions Account Manager: William Visconti National Account Executive: Trang Vu Data Solutions Account Manager: Rose Zavala Client Service Specialist: Mike Sweeney Marketing Coordinator: Sara Ryerson INFORMATION SERVICES Director of Operations & Product Strategy: Samantha Bullock Data Operations Manager: Tammy Dandurant Data Quality/Key Accounts Manager: Ellen Gendron Data Vendor Coordinator: Katherine Snow Acquisitions Coordinators: Linda MacDonald and Christina Doucette Transaction Acquisition Coordinator: Wally Bullock INFORMATION TECHNOLOGY Software Development Manager: Michael Paul Senior Applications Developer: Joe Chan Technical Assistant: Matthew Paul, Tyler North, Joey Roundtree FINANCE & ADMINISTRATION Controller: Gena Salvo Accounts Payable: Olga Khalaydovsky Business Manager: Nicole Tower BANKER & TRADESMAN (ISSN 0005-5409) Volume 203, Number 15 Published each Monday. ©2022 The Warren Group LLC, 2 Corporation Way, Suite 250, Peabody, MA 01960. All rights reserved. No part of this publication may be reproduced without the written consent of the publisher. Banker & Tradesman and The Warren Group are trademarks of The Warren Group LLC. Subscriptions to Banker & Tradesman: Premium: One year – $399 Two year – $699 Single copies are $10.00 each and are on sale at the offices of the publisher. POSTMASTER: Send address changes to: Banker & Tradesman The Warren Group 2 Corporation Way, Suite 250, Peabody, MA 01960 Phone: 617-428-5100. Fax: 617-428-5119. Periodicals postage paid at Peabody, MA, and additional mail offices. P hoto courtesy of Salem Five Bank. 21-STORY HOTEL PROPOSED IN BACK BAY • After putting the project
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No. The incredibly tight market
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Salem Five President and CEO Ping Yin Chai cuts the ribbon on the NESN’s newly rebranded Salem Five Studio.


Gentrification Has Already Wrecked ‘Town Character’

Continued from Page 1

It is a theme that Republican candidate for governor Geoff Diehl seized upon, injecting himself into the debate over Baker’s housing plan.

And as he scrounges for votes in his quixotic campaign for governor, the favored candidate of the MassGOP’s Trump wing is clearly hoping to tap into the ire of suburban NIMBY types.

Diehl, in a statement, said he is all in favor of “more affordable housing alternatives.”

But Diehl goes on to warn the state’s push for more apartments and condos could lead to more “high-density multifamily housing” that would “significantly change the traditional look and feel of these communities against their will.”

regressive market forces communities have unwittingly unleashed by barring new housing at every opportunity, often in the name of preserving community character and the status quo.

If that was the goal, they have failed miserably, because the housing shortage such NIMBY policies have created have led to a relentless upscaling and gentrification.

Decades of NIMBYs

Efforts by towns and suburbs to block new housing began to gain critical mass in the 1990s just as the Boston area was achieving economic liftoff thanks to its research universities, hospitals and the growth of the tech and later life sciences industries, not to mention a booming financial services sector.

“The state’s plans could lead to more ‘high-density multifamily housing’ that would ‘significantly change the traditional look and feel of these communities against their will.”’
– Republican Candidate for Governor Geoff Diehl

To which I say to Diehl, the MMA and all the local officials up in arms over the idea of multifamily housing – where have you been for the last three decades?

The so-called “character,” as in the demographics, as well as the look and feel of towns across Greater Boston, has been warped almost beyond recognition in recent decades. Not by what has been built, but rather by the

All those highly paid researchers, workers and executives helped drive up the prices of homes in the Cambridge/Somerville area and in towns along and inside the 128 beltway to levels unimaginable three decades ago.

As we entered 2022, the median price of a home hit $1 million and up in more than 20 different towns across Greater Boston and the Cape and Islands, including Nantucket ($2.2

million), Brookline ($2 million), Weston ($1.8 million), Chilmark ($1.7 million), Cambridge ($1.68 million) and Wellesley ($1.65) million, according to The Warren Group, publisher of Banker & Tradesman.

A number of communities that have crossed the $1 million mark in the last few years, like Westwood, Carlisle, Sudbury and Manchester. That’s a five-fold increase from a decade ago, when there was just five.

And more are waiting in the wings, with the median price in Somerville, Jamaica Plain, Orleans, Truro and Chatham all closing in on the million-dollar mark.

Moreover, with no new subdivisions of single-family homes getting built in pretty much any of these communities, pent-up demand has led the rise of the tear down, and where older, more modesty sized home, often a ’50s or ’60s ranch or split level, is taken down to make way for McMansion.

A phenomenon that a few years ago was confined to uber wealth suburbs like Wellesley, Weston and once-solidly middleclass Needham, the tear-down trend has now spread to fast-gentrifying towns like Natick.

Tear downs that destroy the already dwindling stock of middle-class homes certainly speak to a community’s character, and it’s not a particularly flattering reflection.

In fact, a surge in multifamily housing might actually bring back middle- and working-class families to towns and suburbs across the Boston area from which they are being increasingly excluded.

If that doesn’t count as preserving community character, I don’t know what does.

Scott Van Voorhis is Banker & Tradesman’s columnist; opinions expressed are his own. He may be reached at

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The Massachusetts mortgage market barely noticed when the Federal Reserve finally moved the needle and rates rose to numbers not seen in a decade or more.

The Fed’s initial quarter-point rate increase last month deterred very few buyers or sellers from their spring plans. A few weeks later, as rates rise above 4.7 percent and show no signs of slipping back, Realtors report buyers are as aggressive as ever – and the spring market is just beginning (see page 10).

Though it originally planned for a half-point increase on that first occasion, the Fed was spooked by the war in Ukraine and held to a quarter-point. That was the right call – a full .5 percent would have in turn spooked consumers. Better to slide in than cannonball.

The Fed now walks a tightrope now as it tries to hit a soft landing – raising rates enough to slow inflation, but not send the county into an economic tailspin and another recession.

Mortgage rates have increased 1.5 percentage points of the last three months, the fastest threemonth increase in rates since May 1994, Freddie Mac’s Chief Economist Sam Khater said in a statement last week. As a result, the average buyers’ monthly payment has increased by about 20 percent from a year ago.

Clearly this will impact buyers’ budgets, but not enough to make an immediate difference here in Massachusetts. The inventory levels are so low that even if 5 or 10 percent of buyers drop out of the pool due to affordability concerns, there are still thousands of hopefuls looking at open houses every weekend. Sellers may see fewer offers in their bidding battles, but the war rages on.

Like the Fed’s attempted soft landing, there’s no way to know how high rates have to rise to slow the juggernaut of home prices in Greater Boston. In Freddie Mac’s example, what was a $2,000 monthly payment a year ago is now $2,400.

Unfortunately, all this does is shift buyers down from one purchase price point to another. Buyers may need to expand their search areas or criteria, but the same inventory constraints apply.

Barring any surprises – which is not a situation one can count on in 2022 – this year’s market is likely to remain hot, though probably slightly cooler than 2021. As Realtor Meg Steere noted in Cameron Sperance’s story on page 10, the three properties she brought to market in the past week all received multiple bids. (Editor’s disclosure: One of those properties is owned by Banker & Tradesman Associate

You’ve scrimped and saved, and you finally have enough money for a decent down payment. But do you have enough to cover your closing costs, too?

The taxes and fees that you must pay at settlement vary widely from place to place. Even the estimates from online calculators differ broadly.

For example, on a 30-year, $250,000 loan in my ZIP code, Bank of America’s estimator says closing costs will run almost $11,000. That’s roughly 4.4 percent of the loan amount. But NerdWallet’s calculator on the same loan (but not based on any ZIP code) says the charges will run about $8,150, or 3.6 percent.

Generally, you can figure on paying anywhere from 2 percent to 5 percent of the loan amount. The lower the loan amount, the higher the percentage, says Keith Gumbinger of mortgage information company

Even at lower percentages, charges can mount quickly. But to paraphrase Mighty Mouse, help is on the way.

State, Local Help

Many state and local governments offer assistance with down payments and closing costs. Most programs are targeted – say, to first-time buyers, first responders or teachers – but others are available to anyone who needs a little help.

Down Payment Resource, a firm that tracks some 2,200 down payment and closing cost assistance programs, offers plenty of examples.

For any buyer in Alaska, the state housing finance corporation offers a grant of up to 4 percent of the loan amount. The grant does not have to be repaid.

The city of Kenosha, Wisconsin, offers a 4 percent grant that doesn’t have to be paid back as long as the homebuyer lives in the house for a minimum of five years. (The grant must be repaid if the buyer moves out sooner.)

In Somerville, Massachusetts, income-eligible rookie buyers can get help with closing costs up to $5,000.

The Virginia Housing Development Authority’s Closing Cost Assistance Grant provides up to 2 percent of a home’s purchase price or appraised value (whichever is smaller). Recipients must be first-time buyers, unless the property is located in targeted areas.

Oregon’s Home Stretch program offers a $1,000 grant to any buyer moving into the central part of the state.

Veterans, Teachers Have Options

There are other programs, too, offered by employers or private organizations. For example, Homes for Heroes, a nationwide network of real estate, mortgage and local business specialists, offers up to $700 per $100,000 in purchase price to active military personnel, veterans, teachers, first responders and members of the medical community.

As long as you work with an affiliated agent, HFH will reimburse your out-of-pocket closing costs up to 0.7 percent of what you paid for the house. Plus, if you work with other professionals in the network, you can save an average of $500 on lender fees, $150 on title services and $50 on a home inspection. The average total savings after closing is $2,400, the company says.

There are other ways to save, too. While some charges cannot be changed – prepaid interest and taxes, for example – you might be able to lower others:

First, ask the seller to pay some or all of your closing costs. Note: This probably won’t fly in the current seller’s market. But when the tide turns, it’s a good ploy.

Second, some lenders have programs to help with closing costs, so ask yours what may be available. Under its America’s Home Grant program, Bank of America gives closing cost grants of up to $7,500 for its borrowers, and that’s on top of a down payment grant of up to $10,000.

Third, you can try bargaining with each service provider. For example, if you are working with a mortgage broker, ask if they’ll trim their commission a bit. Ask the same of your real estate agent.

Insurance Offers Other Savings

If your down payment is less than 20 percent of your loan amount, you’ll need mortgage insurance: a policy you pay for, but which covers the lender if you fail to make your payments. That adds anywhere from 0.55 percent to 2.5 percent of the loan amount to the cost of your mortgage. If there is an upfront cost, ask if you can roll that amount into the mortgage. Your monthly payments will be higher, but you’ll need less cash at closing.

Lenders will also require you to purchase title insurance – again, to protect their investment if a defect in the title is found (a long-lost relative suddenly appears, perhaps, or a signature was forged 20 years ago). Again, shop around. Lenders don’t usually care which company you use, as long as they are protected.

At closing, you will be offered the opportunity to buy your own title policy – one that protects YOUR interests – and it’s a good idea to do so. But if you shop beforehand, you may be able to lower the price.

You will need a homeowners insurance policy in place when you reach the closing table, so hunt for the best rates.

If your state requires the presence of an attorney at the closing table, shop around and compare rates. But don’t necessarily jump at the lowest price – you might cheat yourself out of decent representation.

Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at

Cassidy Norton.) Next year’s spring market will be much closer to “normal.” It will certainly more stable and balanced (unless there’s a major recession, or another world war, or any number of other unforeseen tragedies). But for now, look forward to another wild ride. Letters to the editor of 350 words or less may be submitted via email at with the subject line “Letter to the Editor,” or mailed to the offices of The Warren Group. Submission is not a guarantee of publication.
EDITORIAL How to Trim Your Buyer’s Closing Costs EDITORIAL CARTOON Lots of Savings Can Be Found if You Know Where to Look THE HOUSING SCENE BY LEW SICHELMAN SPECIAL TO BANKER & TRADESMAN Charges can mount quickly. But to paraphrase Mighty Mouse, help is on the way. Banker & Tradesman C assidy N orto N Associate Publisher t imothy m . W arre N J r Publisher t imothy m . W arre N Publisher 1975-1988 K eith F. W arre N Publisher 1928-1975 W illard C. W arre N Publisher 1901-1928
Rate Increases Won’t Slow MA Home Price Growth This Year


Without a Transfer Tax, Islands’ Economy Could Wither and Die

Real Estate Lobby Groups Don’t Speak for All Realtors

The Massachusetts Association of Realtors and the Greater Boston Real Estate Board are flexing their considerable lobbying muscle on Beacon Hill in an effort to kill a transfer fee on real estate that would allow communities like ours to finally address the devastation caused by skyrocketing housing costs.

We are longtime real estate professionals on Martha’s Vineyard and Nantucket. These groups do not speak for us, nor do they speak for most of the Realtors, brokers and agents we know.

If something is not done soon, our communities as we know and love them will be gone. We see daily the damage the housing crisis is causing on the Islands. We also know that similar hurt is being done to neighborhoods and families across Cape Cod, in Boston, Cambridge and other communities around the state where firefighters, teachers, restaurant workers, tradespeople, healthcare workers, young homebuyers and seniors are simply being priced out of the places they call home.

Where Doctors Can’t Buy Homes

There are few things of which MAR should be aware.

First, seven police officers on a Nantucket force of 40 are leaving because they cannot afford to live here.

Second, the CEO of Martha’s Vineyard Hospital is worried: the hospital cannot fill 25 percent of their staffing needs because frontline healthcare workers (yes, even the doctors) cannot afford the cost of housing.

Third, each of us can name restaurants, stores and shops in our communities that do not have the staff to remain open as many hours as they need to – or have closed completely.

Fourth, each of us know downsizing homeowners who have wanted to leave their homes to their children but, instead, have sold and left the island because there is nothing in which to downsize – neither to purchase nor to rent.

Public safety. Healthcare. Commerce. Community – these are the victims of a real estate market where houses start at $1 million. Without significant funding for solutions, we are going to kill the goose that laid the golden egg. How does a tourist economy survive without restaurants, or shops, or bike rentals, or plumbers, or musicians or corner stores? And how does any community survive without enough fire, police and hospital staff?

We’ve Tried Everything Else

We have used every available strategy to build or preserve workforce housing. The available revenue streams are simply not enough to counter the skyrocketing cost of living or renting here. We are not going to build our way out of this, not in communities that have – and need to protect – vast areas of natural open space, as well as fragile ecosystems.

And the revenues created will finally be enough for us to take the steps we need to preserve homes, keep seniors and families here, fund housing that allows teachers and public safety workers to remain in our communities and at their jobs.

Each community that opts into a transfer fee has the chance to shape its own solution to the problem – and to protect resident homebuyers and seniors by limiting the fee to high end transactions. Let us say that again: “opts in.” This is an elective tool.

We need to act now, before the communities we love are gone forever.

MAR and GBREB should know this is not simply a problem on our two islands. Communities across Cape Cod are facing the same thing, and this spring we will see more restaurants that can’t open, more seasonal workers living in tents and cars from Provincetown to Bourne.

We have a crisis in communities across the state –that’s why Boston, Somerville, Provincetown, Concord, Cambridge, Arlington, Brookline and Chatham, like Nantucket, have already passed local home rule petitions calling for transfer fees. All these communities have made it clear that they have serious problems and want the option to implement a transfer fee.

We need to act now, before the communities we love are gone forever. And MAR and GBREB need to put their muscle behind constructive change, or step back.

Candace daRosa is a career Realtor and 13th-genration Martha’s Vineyard resident. Ken Beaugrand has been a Realtor on Nantucket for more than three decades.

We need to think creatively, and we need to go where the money is to fund those creative ideas. And where is the money? On Nantucket last year $2.4 billion – that’s billion, with a ‘b’, on one small island –worth of real estate was sold. Does MAR really believe that a 0.5 percent to 2 percent transfer fee on higher end sales is going to do anything to slow that down? Of course not.

‘Buy Three, Get One Free’ in the Housing Market of the Future

Gentle Density Is the Affordable Way to Attack this Crisis

If you are shopping for a home to rent or buy, I have bad news for you: Living in Massachusetts is going to be very expensive. It might be unaffordably expensive for you. But if you, like me, believe in our democracy, I also have some good news: We can fix home prices dramatically quickly and make a dent in climate change, too. To prove the point, come with me for a walk through a typical three-decker, and bring your calculator.

Here, we have three apartments on three floors. The apartments have over 1,000 square feet and three bedrooms each. There’s no attic. You’ll see in the basement there are three methane gas boilers, three methane gas water heaters and a bunch of junk left behind from previous renters. (Push aside that rusty bike.)

The main carrying beam of the house is a bit cracked and sagged, but stable. The upstairs kitchens are no better. There are still built-in cabinets from when the house was built in 1890. This place is old!

Here’s the question for today: The owner of this building has $200,000 to invest. How should they invest it?

Where did they get the money, you ask? Well, it doesn’t matter. You can imagine the $200,000 comes from savings at a day job or from equity in the building. (If you dislike landlords, imagine the $200,000 comes from “capitalism, blargh!”) Let’s go back outside and talk about this landlord’s options.

Option 1: Raise the Rents 33 percent

These units currently rent for $1,500 per month each, which is average for the neighborhood. If the landlord renovated them nice with quartz countertops, quiet-close cabinets and stainless-steel appliances, they might get $2,000 apiece.

We’ve been seeing kitchen renovations in this neighborhood come in at no more than $50,000 each.

That’s $150,000 for all three kitchens. Let’s use the rest of our $200,000 budget to add in the structural and plumbing work.

If the landlord does all this, their first-year, cashon-cash return on investment will be a $500 rent increase for each unit, times three units, times 12 months in a year. That’s $18,000.

Given an amount to invest equal to adding a unit, it’s always better to add the unit.

This strategy is not without risk. The higher the rent, the fewer who can afford it. The landlord will be pressured to lower their screening criteria, and then they will be more likely to see a missed rent payment.

Option 2: Increase the Units 33 percent

Suppose instead the landlord used their budget to add a unit. They can’t make a fourth-floor unit, because the structure isn’t strong enough for that. They could clear out the basement and move the boilers, but that sounds like extra work. Probably they would put their unit on the back patio, townhouse-style. There could be two floors and they wouldn’t have to touch the rest of the building. In planning-speak, this is sometimes called an “accessory dwelling unit.” Foundation and framing will be a substantial cost. When the public spends money on renovation, for comparison, we tend to pay $400,000 per unit in construction costs. This private landlord will likely pay half that, because private permitted construction tends to run approximately $200,000 per unit. They’ll build it all per the code. It will be well-insulated and sealed. It will be heated and cooled with heat pumps because

the landlord would like to offer air conditioning. (Besides, that old methane gas line would be a pain to extend.)

In order to equal the cash-on-cash return from option one, the landlord would have to set the fourth apartment’s rent at $1,500. Just imagine: With a brandnew kitchen, new bathroom and air conditioning to boot, such an apartment would be underpriced! This landlord will likely make more money than that. Or else they’ll have less risk, with lots of renters to choose from.

Adding Units Beats Raising Rents

So you see, this landlord would much rather add a unit than raise the rents. The math holds true for any landlord on any size building. Given an amount to invest equal to adding a unit, it’s always better to add the unit.

And we should want landlords to add units. Where three households called Massachusetts home, there now are four. Where 100 percent of the lot was greenhouse gas-emitting, now 75 percent is. Where previously not one unit was suitable for the elderly or others needing air conditioning, now one is.

Of course, you already know the catch: Adding units is usually illegal without a variance or special permit. Zoning will, in every community in Massachusetts – to the best of my knowledge – prohibit the addition of new units without special permission. This prohibition extends to even those renovations that keep the building its original size and shape.

Massachusetts must become welcoming to multifamily “gentle density” as of right. I don’t mean highrises. I mean the homes we see all around us flexing to meet the times. And I mean landlords funding it, not the public, because this is what landlords naturally want to do.

Doug Quattrochi is executive director of MassLandlords Inc.

Candace daRosa Ken Beaugrand

In 1765, Dighton’s wharves were the site of the “Molasses Affair,” a protest of British taxes on molasses similar to the more famous Boston Tea Party. A local ship reported a cargo of 63 casks of molasses to the British custom officials, but the ship actually contained double that number. The customs official ordered the ship’s cargo impounded while he departed for Newport for assistance. While he was gone, 40 local men with blackened faces stole the cargo, ran the ship aground, and drilled holes in the hull to protest British tax policies.

6 | BANKER & TRADESMAN APRIL 11, 2022 3 • Statistics from Dec. 2021 - Feb. 2022 • New Construction Excluded • Source: The Warren Group 1 2 4 5 1 2 3 10 9 8 7 6
Community Change from 2021 February 2022 Change from 2021 February 2022 Acushnet $399,500 13% 14 8% Attleboro $425,000 14% 45 -6% Berkley $475,000 16% 13 86% Dartmouth $490,500 26% 26 -41% Dighton $470,000 9% 13 -32% Easton $615,000 15% 35 3% Fairhaven $365,000 16% 16 -20% Fall River $355,000 14% 52 0% Freetown $410,000 21% 16 78% Mansfield $550,000 17% 21 -25% New Bedford $335,000 14% 69 0% North Attleboro $450,000 8% 26 0% Norton $535,000 19% 16 -16% Raynham $494,500 18% 12 -14% Rehoboth $580,000 18% 20 5% Seekonk $431,000 25% 20 -29% Somerset $386,000 12% 33 -18% Swansea $420,000 29% 28 -30% Taunton $397,500 9% 57 0% Westport $400,000 -9% 13 -43% Bristol County $408,000 12% 545 -11% • Statistics based on single-family home sales of $1,000 and above, excluding condominiums and foreclosure deeds • Source: The Warren Group $550,000 $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 STATISTICAL SNAPSHOT TOP 10 EXISTING HOME SALES MEDIAN SALES PRICES SALE VOLUME 650 600 550 500 450 400 350 300 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 200000 250000 300000 350000 400000 450000 500000 550000 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 Bristol Massachusetts TOP 3 MORTGAGE LENDERS % of Market Share Rankings and Mortgage Market Share stats include purchase and refinance mortgages for all residential properties in February 2022 Market share percentage based on volume of mortgages Source: The Warren Group 1 2 Teachers Insurance 14.48% Rocket Mortgage 5.11% Rank Lender 300 350 400 450 500 550 600 650 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 Organization Ranked by volume of loans in February 2022 • Source: The Warren Group David Pereira Rose Cortes Kevin Oliveira Rank Lender TOP 3 LOAN ORIGINATORS 3 Santander Bank NA 5.10% 80 Ridgewood Road 80 Ridgewood LLC 12/21/2021 Attleboro Deborah W. Leach $3,507,500 222 Bay Point Road Bharat Ramlochan-Tewarie 1/26/2022 Swansea Paul Zheng $2,370,000 10 Hetty Green Drive George Davis 12/15/2021 Dartmouth David E. Adelberg T $2,000,000 19 Wenlock Circle Mobeen Gajee 12/13/2021 Easton Daniel C. Han $1,307,000 132 Bay Point Road Dean Munro 12/10/2021 Swansea Bay Point Road NT $1,300,000 6 W Rockland Farm Matthew D. Traub 12/1/2021 Dartmouth Jeffery C. Gutweiler $1,225,000 1267 Drift Road Leonard A. Mermel 12/6/2021 Westport Stephen E. Barkhuff $1,120,000 6 Motta Drive Ryan P. Fitzgerald 12/1/2021 Dartmouth Jose J. Fernandes $1,100,000 43 Tanglewood Drive Adilson Lopes 12/20/2021 Easton Diann M. Abela $1,100,000 106 Sheridan St. Michael T. Walter 2/4/2022 Easton Steven A. Madonna $1,050,000 Street Address Community Buyer Seller Date Price Street Address Community Buyer Seller Date Price Rank Rank • All sales through February YTD • Graph based on single-family home sales of $1,000 and above, excluding condominiums and foreclosure deeds • Source: The Warren Group • All sales through February YTD Graph based on single-family home sales of $1,000 and above, excluding condominiums and foreclosure deeds • Source: The Warren Group “The worst tyrants are those which establish themselves in our own breasts.” — William Ellery (1727–1820), revolutionary who took refuge in Dighton after fleeing the British occupation in Newport, Rhode Island SPOTLIGHT Dighton YEAR INCORPORATED 1712 TOTAL AREA 22.6 square miles POPULATION 8,101 DENSITY 360 people per square mile TAX RATES Residential: $14.29 Commercial: $26.17 TOTAL NUMBER OF HOUSING UNITS 2,591
Fairway Independent Mortgage United Shore Financial Services LLC St. Anne’s Credit Union

Housing Pipeline Faces a Stress Test

Interest Rates, Construction Costs Pressure Financing

The one-two punch of rising interest rates and spiraling construction costs points to a slowdown in Greater Boston multifamily development, even as apartment rents and home prices shatter all-time records.

Apartment and condominium developers face shrinking profit margins, and some projects are having difficulty securing financing, in a sign of a pending decline in the construction pipeline.

Mount Vernon Co. Chairman and Founder Bruce Percelay said he’s shifting his multifamily development firm’s focus away from Boston as deals become harder to pencil out.

“That is the straw that breaks the camel’s back,” Percelay said, referring to rising interest rates that have sent rates on construction loans over 4 percent. “We as a company are starting to shift our focus to New Hampshire in a big way.”

Mount Vernon Co. has developed such recent multifamily properties as the 132-unit Radius and 83-unit Arthaus, both in Allston. It’s in permitting for a 99-unit apartment complex at 30 Leo Birmingham Parkway.

Boston Mayor Michelle Wu campaigned on a housing platform of raising the mini-

mum allocation of affordable units in multifamily developments from 13 to at least 20 percent. At a city hall press conference earlier this month, Wu reiterated that she is still dissatisfied with “levels of affordability” in new developments. Wu suggested that rising housing prices are to blame for a recent U.S. Census Bureau report of a 3.3 percent decline in Suffolk County’s population between July 2020 and July 2021.

The administration is reviewing consultants’ proposals for a feasibility study on how to meet or exceed the 20-percent affordability target, before making any changes.

another layer of uncertainty to developers’ expectations for multifamily projects in Boston, said Travis D’Amato, a managing director at brokerage Walker & Dunlop.

“That is the straw that breaks the camel’s back. We as a company are starting to shift our focus to New Hampshire in a big way.”
– Bruce Percelay, chairman and founder, Mount Vernon Co

“There is a study out right now to really understand the market conditions and what the impact during the pandemic has been to change the economic outlook for Boston, and the best way to meet our goals to encourage growth and development and also having the resources to ensure affordability,” Wu said.

The proposed changes to the IDP and Wu’s promises of reforming the BPDA add

“It’s harder to pencil returns, and there’s a cloudier permitting process now,” he said. “How does it work to get a deal permitted in the city these days?”

Meanwhile, suburban apartment properties’ strong rent performance and occupancy rates throughout COVID-19 still offset construction cost increases, D’Amato said.

“Land is worth more in the suburbs than it was pre-COVID,” he said, mentioning communities with MBTA rapid transit service such as Somerville and Revere. “The majority of the pipeline is in the suburbs.”

Percelay said an increase in Boston’s affordable unit minimums would have the unintended consequence of reducing production of market-rate and affordable units alike by making it harder for projects to obtain financing.

Land Costs Bid Up by Lab Rivals

Multifamily developers also continue to face hurdles acquiring development sites in the first place. Life science developers are winning bidding wars in an ever-expanding list of lab clusters in and around Boston. Some of the new lab clusters are located in areas that had been multifamily development hotspots in the past decade, such as Allston-Brighton, Watertown and Cambridge’s Alewife.

Continued on Page 12

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APRIL 11, 2022 BANKER & TRADESMAN | 7 To learn more, visit: Member FDIC
Developers of a 275-unit apartment and condo complex next to the MBTA commuter rail’s Readville station are seeking to sell or find a joint venture partner for the project, which was approved in late 2020 with an estimated cost of $70 million.
I mage courtesy of Boston Planning and Development Agency and The Architectural Team

A Framework to Help Understand Customers


Title: Senior Principal and Director of Customer Experience, Aite-Novarica Group

Age: 50

Industry experience: 18 years

Even before the pandemic, the “Amazon effect,” had changed consumers’ expectations about how they interact with companies, and Paul Legutko wants to help banks, credit unions and other financial institutions rethink these interactions. As director of customer experience at Aite-Novarica Group, Legutko leads a new research practice at the Boston-based advisory firm that provides a framework companies can use to adopt or improve strategies around customer experience. As consumers interact with banks and credit unions through multiple channels, Legutko said, analyzing experiences from the customer’s perspective can provide a competitive advantage to community-based institutions.

You can have a fantastic customer experience built on top of a terrible business process and vice versa.

Legutko’s career has seen him work with survey research, website analytics, customer analytics, big data and customer-facing technologies. He spent time at Ernst & Young and Hill Holiday before joining Novarica, which merged with Aite Group last summer. Legutko has just authored a free report available through Aite-Novarica called “Understanding Customer Experience: A CX Framework.”

Q: What is the current state of customer experience?

A: For a lot of smaller community banks, credit unions and regional banks, everyone knows that they need to focus on customer experience. Just in the last year, 70 percent of the institutions that we surveyed recently said that budgets had increased for customer experience. Leadership recognizes that it’s something they need to take seriously. In talking to a lot of companies that are new to it, they don’t know where to turn; they don’t know where to start. Unlike something like marketing, which has been around for hundreds of years, customer experience is a relatively new discipline.

Q: What needs to be fixed about customer experience?

A: Customer experience teams tend to devolve into two habits, sort of paths of least resistance. One path that some teams will go down is they will equate customer experience with internal business process. You’ll have a workshop; you’ll talk about the customer experience; you’ll say, “We have a terrible experience around bill payment because we have really bad internal processes.” Then the focus becomes fixing those processes. But fixing the business problem is not same thing as fixing customer experience. You can have a fantastic customer experience built on top of a terrible business process and vice versa.

The other pitfall is to rely on a quick-bought solution. The vendor landscape for customer experience is very rich out there. The temptation – again, the path of least resistance – is for a CIO or someone who’s in charge of customer experience to say, “I’m going to invest in this technology because this vendor says that they can fix everything.” That’s good, because you probably are going to have to invest in technology. But again, you’re losing your focus on the customer in customer experience by focusing instead on a technological solution. It may well be that you don’t need a particular technology to fix something that’s very simple. So, those two temptations are what we see in the current state, which is why we wanted to develop a framework that put the customer back at the center of this.

Q: What does it mean to put the customer back at the center?

A: It means thinking about all of the pieces of the customer journey from the point of view of the customer rather than the point of view of a platform or a business process or internal silos. What that means is thinking about the sum total of the experiences: What are the touchpoints that I have with my customers and how do I categorize them? It means doing your traditional journey-mapping exercises, taking the customer’s point of view, stepping in their shoes and seeing what the journey is actually like. But it is also about assessing that journey against what consumer expectations are today. Do I have closure at the end of this experience? Do I have direction when I’m finished?

It also means thinking about what the customer is expecting in their own head during this experience. How personalized does the customer expect it to be? How much of a human touch does the customer expect? Finally, it’s about measurement: How do you measure the experience from the point of view of what it is that the customer is trying to accomplish? A lot of times experiences are not about a transaction.

Q: What role will the research practice have with clients?


After the two companies merged last year, we were thinking about where we can invest, what kind of research we could provide on a topic – something that all industries care about. That’s why we selected customer experience, because it’s something that everyone sees the importance of.

There are three pillars to understanding customer experience – you need to understand what people do, what people think and what the competition out there is doing. The “what people do” is about behavioral analytics. The “what people think” is about voice of the customer – surveys, social media monitoring, collecting feedback after a phone experience or on the website. And then “what other people are doing” is one of the traditional strengths of the Aite-Novarica Group – industry research, competitive benchmarking, what kind of capabilities other banks are providing. We’re also putting together a group of what we’re calling charter advisers. These are industry professionals – bankers, insurance professionals – who are stakeholders in customer experience and are going to help us understand where the gaps are and where the pain points are as we figure out our research agenda for the rest of the year.

Q: What are you most looking forward to as you launch the new framework and research practice?

A: I’m really excited about having the conversations with bankers and insurers. I get a lot out of these conversations. I like to hear what’s happening out there; I like to hear what the pain points are and what people are excited about. It’s a field that I’ve been doing for a long time. One of the nice things about being a consultant is that you get to see what an entire industry is doing rather than just one company. Having those conversations and being able to wrap a piece of research around them is something that I’m looking forward to quite a bit.

LEGUTKO’S FIVE FAVORITE RESTAURANTS: 1 The Mooring in Newport, Rhode Island 2 Ristorante Simposium in Paestum, Italy 3 L’Entrecôte in Bordeaux, France 4 Ristorante Vecchia Roma in Rome, Italy 5 The Newes from America in Edgartown

Dallas Fed Researchers Warn of Housing ‘Bubble’

Home Prices Becoming ‘Unhinged from Fundamentals’

Ateam of researchers at the Federal Reserve Bank of Dallas issued a stark warning that American home prices “are again becoming unhinged from fundamentals.”

The team published research last month analyzing the bank’s in-house index of home prices nation-wide, the ratio of home prices to rents and the ratio of home prices to disposable income. Their conclusion was that signs of another housing bubble are in the air.

At the heart of their analysis is a contention that buyers have become too “exuberant,” paying higher prices than they otherwise should be based on market conditions, as they did in the years leading up to the financial crisis of 2007-2008 and the Great Recession.

“Since the beginning of 2020, the priceto-rent ratio has soared beyond what ob-


served fundamentals alone can explain,” Jarod Coulter, Enrique Martínez-García, Valerie Grossman, Peter C.B. Phillips and Shuping Shi wrote.

At the heart of their analysis is a contention that buyers have become too “exuberant,” paying higher prices than they otherwise should be.

The authors speculate that home price increases driven by low-interest rates and other market fundamentals might be fueling the “fear of missing out” among buyers, particularly among investor-buyers.

Still, the Dallas Fed researchers don’t believe the current market dynamics show po-





BUILT: 2021-2022

• Boston-based Marcus Partners has completed a trio of class A industrial developments in eastern Massachusetts that will be fully leased upon completion.

• Marcus Partners acquired an obsolete office building at 20 Constitution Drive in Taunton’s Myles Standish Industrial Park in May 2021, and constructed a new 88,000-square-foot facility that is fully leased.

• In partnership with Howland Development, Marcus Partners completed a 104,380-square-foot facility at 64 Research Drive in Haverhill which will be 100 percent occupied by Crane Worldwide. And in Franklin, Marcus Partners delivered a 150,000-square-foot class A industrial building at 206 Grove St. and leased it to a single tenant.

• Marcus Partners is expanding its 3 million-square-foot portfolio of industrial properties along the East Coast through ground-up development and existing product.


“Our vertically integrated platform allows us to move swiftly from acquisition through delivery. These three projects, all of which were 100 percent leased upon delivery, illustrate our ability to work nimbly with users, municipalities and our partners on accelerated timelines to deliver state of the art projects that benefit all stakeholders.”

— Josh Berman, senior vice president, Marcus Partners


Drop Steve a line at

tential for another 2007-style crash.

“Among other things, household balance sheets appear in better shape, and excessive borrowing doesn’t appear to be fueling the housing market boom,” the authors write.

So far, while applications for purchase loans are down nationwide from last year, demand for these mortgages has stayed quite steady week over week, even as Freddie Mac reported the average interest rate

on a 30-year, fixed-rate loan shot up from 3.89 percent during the week ending Feb. 25 to 4.42 percent for the week ending March 24. The Mortgage Bankers Association reported on March 24 that the national median payment applied for by applicants jumped 8.3 percent to $1,653 in February, up from $1,526 in January.

This Month in History


WHEN: APRIL 19, 1965


• Prudential Insurance Co. executives and VIP’s including former presidential candidate Adlai Stevenson II commemorated the completion of the 52-story, 1.2-million-square-foot Prudential Tower, Boston’s tallest building until the completion of the Hancock Tower in 1976.

• In 1957, Prudential announced plans for a new headquarters that would anchor a major development at the former Boston and Albany rail yard in Back Bay.

• The development raised hopes of an economic rebirth for Boston amid the flight of residents, jobs and retailers to suburbia. The project also included construction of War Memorial Auditorium, later renamed the John B. Hynes Convention Center, and the 1,220-room Sheraton Boston Hotel.

“When I graduated from high school at age 17… I went to work at the Prudential. I was there a year when they were building a new Prudential Tower and they asked a group of us if we would go to New Jersey, their home office, and learn to work with the new computers because they were putting the mainframes at the Prudential.”

— 2018 interview with Maureen Reen, age 72, “We Are Boston: Stories of Hope, Struggle & Resilience” an oral history project led by Daniel Johnson, city of Boston Artist-in-Residence

week, Banker & Tradesman commercial real estate reporter Steve Adams spotlights a commercial real estate property in Massachusetts notable for its high deal activity, unique design or one-of-a-kind special features.
B oston Redevelopment Authority photographs, Collection # 4010.001, City of Boston Archives, Boston
Boston’s tallest building: When it was finished in 1965, the Prudential Center was a towering symbol of the city’s rebirth.


Rising Interest Rates the Latest Headwind for Mass. Homebuyers

Buyers, Sellers Look to Act Before Monthly Payments Rise

Viera has already noticed a slowdown in viewings at condominiums priced at $600,000 and below in East Boston.

Mortgage rates are at their highest in years and expected to go higher, but Massachusetts brokers and sales agents say fiscal policy is currently only a small part of the issues impeding would-be buyers from landing a deal.

Concerns of not enough supply and overwhelming demand still dominate residential real estate conversations from Pittsfield to Provincetown.

That doesn’t mean Realtors are ignoring the threat of interest rates going higher and what that could mean for home sales in the Bay State – particularly for first-time homebuyers and those looking for a less expensive place to live.

“I see it becoming the headwind, and everybody else will see that as well soon,” said Melvin Vieira, Melvin Vieira, 2022 president of the Greater Boston Association of Realtors and an agent with RE/MAX Destiny. “I’m that guy who’s looking over the horizon going, ‘There’s something coming.’”

First-Timers Most at Risk

The average interest rate on a 30-year fixed rate mortgage in the U.S. approached 5 percent last week, up from the sub-3 percent range seen last fall, according to Freddie Mac. Low interest rates fueled a massive wave of demand for homes and inspired first-time homebuyers to make the jump from renting to owning.

Those buyers are likely to be the first impacted from the rise in rates. This means a buyer who may have been paying $1,200 a month at a 3 percent mortgage is now facing a $2,000-per-month payment. That’s a hefty jump for more price-constrained buyers or those only used to smaller rent increases.

“It takes that pool of buyer and moves them to either a different number or area,” Vieira said. “Now they have to open up their range of where they’re going to look.”

Other brokers and agents aren’t ready to ring the alarm bell on rising interest rates, but they are advising clients to pay attention. Some are even advising clients to consider putting their homes on the market sooner than later in the event of a softening market.

“Most people are trying to say sooner rather than later because interest rates are going to go up,” said Kathleen McSweeney, president of the Realtor Association of Central Massachusetts and a broker associate at Lamacchia Realty. “But we’re also advising all our buyers to reconnect with their loan offi-

Some brokers and agents aren’t ready to ring the alarm bell on rising interest rates, but they are advising clients to pay attention.

cers just to make sure the pre-approval they may have received several months ago is still valid because that could have changed.”

Meg Steere, a Greater Boston sales associate with Berkshire Hathaway HomeServices, focuses on sales under $2 million and still had multiple bids on each of the three properties she took to market in the last two weeks.

“What I am seeing from the buyer side is that interest rates going up has sparked sentiment more like, ‘Okay, we want to go ahead and find a place before rates go higher,” Steere said. “On the seller side, I’m certainly talking about how now is the perfect time to do it. We don’t know how inflation as well as global events and interest rates going up will affect

things, but it will. Why not take advantage of right now? It is this golden period to put your house on the market.”

There are signs of some softening across the state but not a massive slowdown, according to sales data from The Warren Group, publisher of Banker & Tradesman.

Sales Totals Off Downtown

Boston’s urban core – encompassing the Back Bay, Chinatown, Fenway, Financial District, Mission Hill and the North and South End neighborhoods – saw a 26 percent decline in the number of condo sales through February compared to the first two months of last year.

The single-family sale total in Springfield dipped a little more than 4 percent from this time last year, but it’s still only eight less than the 184 sales seen in 2021. Worcester’s 156 single-family home sales total so far this year is just one down from this time last year.

“We do have supply. It’s just moving quickly off the market,” said Cheryl Malandrinos, a broker associate at Berkshire Hathaway HomeServices and president of the Realtor Association of Pioneer Valley. “Because it’s moving so quickly off the market, we need more to replenish it, and housing production has lagged.”

The main real estate headwind for Cape Cod, Nantucket, and Martha’s Vineyard has more to do with a severe lack of supply. That’s the chief obstacle to overcome before rising interest rates even enter the conversation, sales agents there say. A flood of second homebuyers drove a surge in home prices across the region, and it has severely zapped the pool of available supply.

There were 388 homes for sale on the Cape and Islands at the end of last year, according to the region’s multiple listings service. That’s down from the 859 homes for sale at the end of 2020 and well below the 2,069 seen at the end of 2018.

Rising interest rates won’t help buyers at more affordable ends of the housing spectrum on the Cape, but these buyers were already getting priced out of the market, said Nichole Willey, a Cape and Islands-focused broker associate at Keller Williams.

“Interest rates are changing, but the demand isn’t changing,” Willey said. “People still need a place to live, and there are still no places to move to. People are not listing their homes because they don’t have a place to buy.”


Study: Boston Leads Nation in Rising Construction Costs

Continued from Page 7

“Land costs are higher in the city, and what life science has done to the multifamily pipeline has made it that much more difficult to find land sites,” said Chris Sower, executive managing director for Cushman & Wakefield. “Lab has won that battle for the last 12 to 18 months.”

Even approved sites outside of Boston’s life science clusters face uncertain prospects. In Hyde Park, the developer of a 273-unit complex that was approved in late 2020 is looking to sell or find a financial partner.

Boston-based Ad Meloria LLC planned to build the two-building, 332,000-square-foot complex on a 2.7-acre site at 1717 Hyde Park Ave., next to the MBTA commuter rail’s Read-

ville station. The developers now are seeking to sell or find a joint venture for the project, including 151 condos and 122 apartments, according to a Colliers listing. Ad Meloria did not respond to requests for comment.

Settling for Lower Returns, for Now

Construction industry research also indicates that Boston’s decade-old multifamily construction boom may be nearing an end.

At 9.9 percent, Boston had the largest increase in construction costs out of 12 major U.S. metros between January 2021 and January 2022, according to consultants Rider Levett Bucknall. The firm places Boston’s overall construction cycle in “mid-decline,” trailing

only Seattle, Chicago and Las Vegas among 17 North American metros that are closest to the next market cycle trough.

The changing financial equations are forcing developers to accept lower returns, but not placing a significant dent in approved projects’ financial viability so far, Sower said. Multifamily developers looking to build in Boston now have to settle for projected returns on costs of 4 percent or lower, compared with the mid-5-percentage range a year ago.

“People are still bullish on Boston and are willing to adjust returns for the right project and the right return,” Sower said.

The changing economics make it harder for local developers to compete with larger national players such as merchant builders, REIT’s and insurance company-backed firms, Sower said.

The prospect of continued rent gains is enticing some multifamily developers to accept lower returns. Median Boston-area apartment rents have pushed past their pre-COVID levels to all-time highs, according to recent industry research.

Rents Surpass Pre-COVID Levels

Zillow and CoStar reported that apartment rents in Greater Boston rose nearly 14 percent in 2021 to over $2,600 a month, as off-campus college renters returned to the city when inperson learning resumed.

“Rental pieces have continued to escalate, along with the other things, so that at least helps the other side of the pro forma,” said John Tocco, a partner at V10 Development, which is planning apartment projects in Everett and Worcester. “People still find Boston and Massachusetts a very attractive place to move and live, which contributes to demand.”

V10 Development is awaiting updated cost estimates for its 21-story SKY Everett tower, previously estimated at $215 million, as it prepares to seek a construction loan. The firm bought the industrial property near Revere Beach Parkway for $3.9 million in January.

Michael Procopio, CEO of Lynnfield-based multifamily developer Procopio Cos., said the region’s recent rent and condo price gains are keeping financing for new projects afloat.

“Typically as mortgage rates rise, you see prices decline. You’re not seeing that,” he said. “You’re seeing rates go up, and rents and sale prices go up, which points to our undersupply.”

Even so, Procopio is hedging his bets by diversifying the firm’s development pipeline into lower-cost markets. His firm has three out-of-state projects in its development pipeline and is seeking to acquire another halfdozen sites including locations in Florida, North Carolina and Texas. Email:

Rising interest are blowing through the market and causing some buyers to crowd into the market – and some sellers to jump in, too.
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Boston sustained a trademark bull condominium market in 2021. This dramatic uptick in activity was a powerful microcosm of the overarching housing trends that swept the nation. Sellers were eager to capitalize on historically high prices and sold to an army of buyers seeking the advantage of low interest rates and driven by pent-up demand. Nowhere was this more evident than at the high end of the market.

In 2020, the pandemic discouraged urban living among empty nester buyers, a demographic of paramount importance to the luxury market. However, as the value of their homes rose, the city came back to life and they became more disillusioned with “suburban living,” they made the leap to move into the urban core. This cohort provided the basis for the extraordinary jump in absorption of luxury sales, over 17 percent year over year.

Also contributing to the sales at the highend was the influx of urban dwellers trading up; affluent, young, high-income earners new to the city and the return of the “parent investor,” purchasing for their children.

But – with 2021 statistics such as an 11 percent increase in prices for the luxury market

and a 30 percent increase in sales over 2 million – 2022 has big shoes to fill.

Notwithstanding that challenge, the truth is 2022 is poised to repeat another banner year, albeit slightly cool in comparison. Interest rates are gradually inching up, affecting the affordability of the product and the events on the world stage could produce a lack of consumer confidence, resulting in cautious discretionary decisions. However, the overarching driver will still be a lack of supply.

Demand Far from Filled

Boston is experiencing an historical lack of housing, at all price levels. There were over 4,600 closings in 2021 and 440 of those were over 2 million, up 30 percent from the previous year. To clarify, Boston’s generally accepted definition of “luxury housing” consists of full-service, highly amenitized buildings with prices exceeding $1,500 per square foot. With that number quickly surpassing over $2,000 per foot, these units tend to exist in primarily newer, highrise product.

Consider that there are approximately 175 unsold, new luxury units available that can close this year, 100 unsold available to close in 2023 and 500 under construction to close after 2023. Resales will add approximately 30 percent to these numbers. With an absorption

at over 400 units per year, that total provides barely than half of the inventory Boston will need over the next three to four years.

The challenges of entitlement in this city are becoming more onerous. The threat of a luxury resale tax, expanded affordable housing requirements and overwhelming construction costs will force developers to reconsider creating housing in Boston. These impediments and resultant lack of supply will continue to drive up the value of the inventory we have, resulting in even higher price escalation. With Boston’s robust economy leading the

way, our position on the world stage is significant and noteworthy. High-paying jobs and employers continue to follow the brain trust and sources of human capital. We are fortunate to be the recipients of all that good will. As the city continues to enjoy its renaissance, the equity-rich buyers will choose to move here, stay here and trade up to newer buildings, with expansive amenities and hotel-level service – all “luxury” appointments.

Boston is poised to experience another good year, supported by price appreciation, in a tightly supplied market, continued inmigration of high-earning residents and an escalating economy.

Sue Hawkes is the managing director of The Collaborative Cos.

BOSTON 1 BARNSTABLE 3 5 CHATHAM Address: 268 Cedar St., Chatham Price: $7,300,000 Buyer: Kedros 2021 T Seller: Long Priscilla H Est Size: 2,299 square feet on 26.26 acres Agent: Ward Brown, William Raveis – Chatham Sold: 3/25/2022 2 This week’s Gossip Report includes two very different versions of seaside living. The second home in this week’s list is a throwback to the rough-hewn pleasures of Old Cape Cod with its low ceilings and vintage cabinetry. The fifth home and its soaring, light-filled spaces represent the more luxurious, contemporary style. Address: 77 Westerly Road, Weston Price: $5,900,000 Buyer: Archer Avenue Invs 2 LLC Seller: 77 Wrw LLC Size: 11,100 square feet on 1.39 acres Agent: Simon Collaborative Group, Gibson Sotheby’s Sold: 3/22/2022 4 Address: 257 Commonwealth Ave. #3, Boston Price: $7,500,000 Buyer: 257 Commonwealth Ave LLC Seller: Becky Levin and Mark Levin Size: 5,930 square feet Agent: Cheryl Marsh and Tim Marsh, Marsh Properties Sold: 3/21/2022 GOSSIP REPORT EDGARTOWN WESTON Address: 56 Rendezvous Lane, Barnstable Price: $7,100,000 Buyer: Louise Sanborn and Robert Sanborn Seller: Donna J. Glowik and John P. Glowik Size: 7,568 square feet on 3.18 acres Agent: Cindy Houlihan, BHHS Robert Paul Properties Sold: 3/22/2022 Address: 69 Kanomika Road, Edgartown Price: $5,650,000 Buyer: Philip Joel Dobrin RET Seller: Belinda Gower and Jeff R. Gower Size: 3,958 square feet on 5.7 acres Agent: Peyton Wallace, Compass Sold: 3/22/2022 4 1 3 5 2 SET FOR SUCCESS Will 2022 Be Another Bull Market for Luxury Sales? Low Inventory Will Triumph Over Inflation, Global Uncertainty BY SUE HAWKES SPECIAL TO BANKER & TRADESMAN Fan Pier in Boston’s Seaport District. With far fewer new high-end condominiums coming on the market this year than buyers are seeking, Boston’s luxury market is poised for another strong year. Consider that there are approximately 175 unsold, new luxury units available that can close this year.
12 | BANKER & TRADESMAN APRIL 11, 2022 THE ONE PLACE TO FIND OPPORTUNITIES RESIDENTIAL REAL ESTATE REAL ESTATE COMMERCIAL AUCTION EDUCATION PROFESSIONAL SERVICES HELP WANTE D AUCTIONS To place an ad in Classifieds, email or call 617-896-5307. BANKERANDTRADESMAN.COM CLASSIFIEDS SECTION BT041022 PREPARED BY: S. SAPERSTEIN DEADLINE: AD SIZE: RUN DATE: 4/11 & 4/18 PREPARED FOR: PESCO SECTION: Auctions PUBLICATION: Banker & Tradesmen AUCTIONEERS • APPRAISERS PAUL E. SAPERSTEIN CO., INC. 144 Centre Street, Holbrook, MA 02343 Tel: 617-227-6553 • MA Lic 295, N.H 2508, R.I 9246, VT 057-0002204 Mortgagee’s Sales of Real Estate at Public Auction & Secured Party Sale of Personal Property MILFORD – 73+/- Room Hotel 1.92+/- Acres of Land 1 Fortune Boulevard, MilFord, Ma Wednesday, May 4, 2022 at 11aM 1.92+/- acres of land located just off Rte. 495 in a commercially developed area. Improved by a 3-story 34,751+/-sf 73 room, limitedservice hotel, currently operating as a Fairfield Inn & Suites by Marriott. Built in 2001 & renovated in 2015. Both real estate and personal property will be sold together as one lot. For more information visit Terms: $250,000 deposit: Increase to 5% within 3 business days. 30 days to close. Full Terms and Information at All other terms announced at sale. Neither Auctioneer nor Attorney nor Mortgagee makes any representations as to the accuracy of the information contained herein. Nixon Peabody LLP, Boston, MA, Attorney for the Mortgagee. Attendees are expected to follow current state and CDC COVID-19 guidelines. A Powerful Platform With Massachusetts’s Premier Real Estate and Financial News Source Banker & Tradesman has been a flagship publication for more than 140 years, making it an unparalleled editorial authority in the real estate and banking industries. Banker & Tradesman is a vital tool to a regional audience of 10,000 individuals demanding breaking news, in-depth analysis, and the latest products and services revolutionizing their industries. Also boasting a heavily-trafficked website and a popular daily e-news alert with more than 7,000 readers, Banker & Tradesman serves as a direct route to position your brand’s messaging in front of an audience of key decision makers. 2017 ADVERTISING OPPORTUNITIES To learn more about Banker & Tradesman or to customize a marketing program unique to your business needs, call 617-896-5307 or email 2022 ADVERTISING OPPORTUNITIES Celebrating 150 years, Banker & Tradesman is a flagship newspaper with unparalleled editorial authority in the real estate and banking industries. Banker & Tradesman is a vital tool to a regional audience of 6,000 individuals demanding breaking news, in-depth analysis, and the latest products and services revolutionizing their industries. Also boasting a heavily trafficked website and a popular daily e-news alert with more than 9,000 readers, Banker & Tradesman serves as a direct route to position your brand’s messaging in front of an audience of key decision makers.

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